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Working Paper - Groupe de Recherche en Economie et Developpement International (GREDI) 2020. (20-10):34 pp. 30 ref. ; 2020.
Article in French | CAB Abstracts | ID: covidwho-2045283


We examine the effects of fiscal policy on the Quebec territory using data from Q1-1981 to Q1-2020. To do so, we estimate VAR models and extract government spending shocks according to the sign restriction method proposed by Uhlig (2005). The impulse responses of real GDP, household consumption, private non-residential investment, and the household confidence index to a temporary and positive government spending shock are all significantly positive in the short run. We find high multipliers for total government spending shocks-they are above 2 in the short run, while government investment spending is above 3.5 and shows greater persistence. The possible consequences of the pandemic and the stimulus package on Quebec's debt trajectory complete the analysis. Lastly, government investment spending is the best way to get the economy going and even lower the debt ratio to meet the goals for 2026.